**4. Funds collection methods**

Crowdfunding has had a great following in Italy and in the world as it manages to create a direct relationship between the author of the project and potential investors. The platform allows to give visibility to the borrower's project, thus facilitating the collection of funds.

Most platforms can operate according to two very specific collection models. These can have a decisive influence on the success of entering the project on the portal because they provide completely distinct features and modus operandi.

The first model is represented by "all-or-nothing." Its application starts from the assumption that the borrower inserts a target in his project, or indicates the sum of money to be obtained within a given period of time. During this period of time, the platform does not make any financial transactions vis-à-vis the author of the project, despite payments from investors. This is due to the fact that the transfer of the collected money is conditional on the achievement of the target: in fact, from the beginning it is established that, in the event that the objective is not achieved, all the sums of conferred money will be returned to the lenders.

On the contrary, the second collection model, called "keep-it-all" or "take-it-all" depending on the portals, provides the payment of the loans obtained regardless of whether or not the target is reached. Using this method, the proposer can periodically obtain payments from the platform or receive the credit at the end of the timing. Certainly the choice of "take-it-all" is preferred above all in cases where the sum of money determined upstream is very high or if the project is risky. To promote the use of this latter collection model, there is also the possibility of obtaining benefits if the target is exceeded; in this case, the model is called "all-and-more" or "everything and more." The incentives may consist, for example, in the exemption from the payment of the commissions withheld by the platform for the service offered or by the payment of the registration fee to the site [15].

There are different types of crowdfunding, both in terms of method and purpose.

In the literature, the "classic" models are: social lending (peer-to-peer lending), equity-based crowdfunding, reward-based crowdfunding, donation-based crowdfunding and royalty-based crowdfunding [9, 12, 16]. Four of these models (equity-based crowdfunding, reward-based crowdfunding, donation-based crowdfunding and social lending) have been codified—for the first time—in the 2012 Massolution Report [17].

In recent years, alongside these classic models, there have been new crowdfunding models that are civic, corporate and do-it-yourself. Invoice trading, real estate, recurring crowdfunding and energy crowdfunding have recently been added to them.

#### **4.1 Classic models**

In this section, the classic models are illustrated. In particular, they are social lending (peer-to-peer lending), equity-based crowdfunding, reward-based crowdfunding, donation-based crowdfunding and royalty-based crowdfunding.

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markets [7].

*Crowdfunding: The Case of Italy*

*4.1.1 Social lending*

credit toward the bank.

the different items.

listed on the stock exchange.

relationship.

*DOI: http://dx.doi.org/10.5772/intechopen.90940*

Social lending is one of the most widespread and articulated forms of crowdfunding. It is a money loan also known as peer-to-peer lending (P2P). Unlike other collection methods, social lending involves the direct or indirect signing of a real debt contract with the persons who request financial resources that is the promoter of the crowdfunding project. Essentially, it is an alternative to a bank loan, with the difference that investors have direct credit toward their financed subjects, contrary to savers who deposit their money in a bank that will provide credit, having so a

Generally, social lending is preferred by families, non-profit associations, SMEs,

1.The borrower indicates upstream the reference interest rate for the calculation of the interest share to be paid. On the other hand, investors offer in a competitive auction the percentage of capital they are willing to cover and the relative interest rate. When the requested quota has been reached, the debtor will pay the interest by making an average of the rates offered, weighted on the basis of

2.The interest rate is chosen neither by the borrower nor by the investors, but it is determined in relation to the rating of the taxable person in the contractual

3.The lenders do not have the possibility to choose who to allocate their credit to because the platform automatically selects the borrowers, respecting always the duration of the loan and the risk-return profile indicated ex ante. Generally, to compensate the impossibility of choosing the recipient of the credit, the platforms provide the establishment of guarantee funds, managed by third companies, the amount of which is determined on the basis of expected losses.

4.Investors indirectly finance the project by buying investment funds, most often

In all the cases described therein, the typical risks of the active position of the obligatory report (credit, liquidity and interest rate risk) remain at the lender and this may compromise, in some occasions, the level of reliability of the platform. To remedy, for example, the hypothesis of an increase in liquidity risk, which would entail a significant loss of confidence by potential creditors, the possibility of transferring the contract in itinere is usually proposed, making use of secondary

which, when registering on the platform, provide all the information needed to establish their creditworthiness. In the social lending to each subject that requests a loan, a rating is assigned, based on the data present in the central risk (as in the normal credit market). To supplement this information, social media opinions are also generally considered, such as reviews of companies that are already started and that offer services. Only if the creditworthiness is valuated adequate, the financial request will be included in the platform. The lower the rating, the higher the interest rate is required based on the risk-return ratio. Therefore, the critical success factor of the platform is the ability to correctly estimate creditworthiness in order to minimize the risk of insolvency. In this regard, some portals have created protection funds in the event of non-compliance; this on the one hand expands the protection of investors, and on the other hand, it increases the costs for the financed subjects.

It is possible to opt for one of the following hypotheses:
